There’s an interesting bankruptcy case Clingman, John K. and Susan Y.; In re,(Bankr. S.D. Tex. 2009) which involves debtors in Chapter 13 bankruptcy who are allowed to pay the mortgage on a home in which the debtor-wife’s parents live. It’s important to note that the home is in the name of the debtors.
Here are the details of the case:
The bankruptcy trustee objected to the debtors’ Chapter 13 Bankruptcy plan because he believed that the mortgage and tax payment of $613.44 for the home occupied by the debtor-wife’s parents was not necessary or allowable. The bankruptcy court ruled against the trustee because of the following:
The court found that both of the debtors’ parents were elderly, had no source of income other than Social Security, and had less than $100 in monthly dis¬cretionary income. The court said that the debtors started providing support to the wife’s parents long before they filed for bankruptcy. The court found that the expense was the “continuation of an actual expense that is reasonable and necessary for the care and support of Mrs. Clingman’s elderly parents under Section 707(b)(2)(A)(ii)(II) and is al¬lowable under Section 1325(b)(3).” The court further found that the expense was not made to circumvent the debtors’ bankruptcy obligations, but was a good-faith effort to pro¬vide needed financial support to the wife’s parents.
This is good news for debtors who are caring for elderly parents. Recently there was a report that revealed that many baby-boomers who are entering retirement age at this time have no savings and/or mortgage-free home. Because of this circumstance many young people who may be contemplating bankruptcy will be financially caring for their parents out of necessity. It is a relief that the bankruptcy court understands the necessity of adult children (even if they are filing bankruptcy) to continue the financial support of elderly parents who are not financially prepared for retirement.